Writing A Business Plan To Take To The Bank

Entrepreneurs create a business plan for many reasons, even for their own use.  Most advisors will tell you to write a business plan before opening a business, and that is good advice.  What they are really saying is "Find out for yourself if it will work. Run financials. Do a marketing plan, etc."  This version is just for you.

There is another type of plan, one that is used to secure financing, such as financing for SBA loans, equipment financing and line of credit financing.  This one is very different from the one you do for yourself.  This is the one that presents your company to the world.

The key is to match the business plan to the kind of financing needed.

A Business Plan For A Standard Bank Loan

A standard business bank loan is typically a mid to long term loan, with financing from $100,000 on up into the millions.  Most banks won't consider financing below a certain threshold because of the time demand to review any loan.  It essentially takes the same amount of time to review a loan for $30,000 as a loan for $300,000, and the bank just can't make much money on the lower amount.  So they don't do them.

Before ever submitting a business plan to a bank, ask directly what their "preferred" range of loan is.  If yours is way above, or way below, don't bother with that bank.  Go elsewhere.

Always, always present as strong a business plan as possible.  The tougher the economic times, the more important it becomes to present a strong business plan.  Start with a basic business plan and add components that will show off your business in your business banking plan.

SBA Business Plan

An SBA business plan is pretty much like the standard bank loan.  Both are processed through the bank, and both must capture the attention and approval of the bank.  So this business plan, too, must be very strong.



The one difference with an SBA loan is the addition of the SBA application.  Since the SBA will guarantee up to 90% of your loan to the bank, it may be worth your while to look at it.

There may also be some flexibility in the amount of the loan, and special programs for minorities that you might qualify for.

Line Of Credit Business Plan

A line of credit is a great source of funding for new businesses and those whose credit has not been fully established.  Since it can be used over and over, it is worth many times the stated amount.

Yes, do prepare a strong business plan when requesting a line of credit.  It demonstrates your professionalism, and it gives you an opportunity to show off your business yourself.  Even if your bank doesn't ask for a business plan, do one anyway.  The more professional you present your company, the better terms the bank can offer.

Equipment Leasing

Banks often handle equipment leasing, or have a subsidiary that does so.  As with a line of credit, go in strong.  The stronger your business is presented, the more likely it is that you will (a) get the equipment lease, and (b) get it on good terms.

The Key To A Strong Business Plan for Banks

1.    Demonstrate how the financing will be repaid in the allotted time.

If you are asking for a short term loan, show how your short term profits will generate sufficient cash to pay back the loan.  If you are asking for an equipment lease, show how that lease will impact your business to generate a stronger cash flow.

2.  Demonstrate that you know what you are doing in your banking business plan.

It is nice to request a line of credit, but if your business doesn't have the ebb and flow of business that benefits from an LOC, you will indeed appear very un-professional asking for it.

The bottom line is to be as professional as possible.  Know what you need and how you can pay it back -- and convey that clearly.